Annual USCPF Roundtable Discussion Proves Fruitful

On March 17 as Taiwan’s momentous presidential elections loomed large on the horizon, the U.S.-China Policy Foundation sponsored its fourth annual luncheon and roundtable discussion highlighting "Current Trends in U.S.-China Relations" at the National Press Club. The morning roundtable discussion was moderated by Ambassador Arthur W. Hummel, former U.S. Ambassador to China, and featured several preeminent China specialists, including Dr. Frederick W. Crook, President of the China Group and Former Agricultural Economist at the U.S. Department of Agriculture; Dr. Pieter Bottelier, former Chief of the World Bank’s Mission in China, and Professor David M. Lampton, Director of China Studies at the Johns Hopkins School of Advanced International Studies. A thoughtful exchange with audience members followed the speakers’ penetrating observations about the myriad issues surrounding the evolving economic and political relations between America and China, with particular emphasis on the role that American foreign policy plays in cross-strait relations.

 Following Ambassador Arthur Hummel’s opening remarks, Dr. Frederick Crook handseled the morning roundtable discussion with an insightful analysis of agricultural trade relations between the United States and China. He explained that agricultural exports play a major role in trade relations between the U.S. and China; yet, despite the rapid expansion of China’s foreign trade in the last thirty years, such trade has been characteristically erratic. While some of this variation can be accounted for by Chinese domestic policy and idiosyncrasies of China’s weather such as droughts, shifting U.S. foreign policies have also played a part, such as the recent farm bill inducing lower subsidies and the termination of the Export Enhancement Program. Dr. Crook pointed out that, although the United States is able to produce land-extensive crops because of its superior internal transportation system and high technological standards, China has been most successful in producing labor- intensive crops. Indeed, China is now the world’s largest apple and garlic producer, which has created stiff competition between U.S. and Chinese producers of these products. Such competition has put a strain on agricultural trade between the United States and China. Dr. Crook concluded that the World Trade Organization (WTO) agreement would be beneficial for both American and Chinese agricultural interests, and would improve bilateral trade relations.

 Dr. Pieter Bottelier elaborated upon the WTO question by elucidating the relationship between the prospective WTO agreement and its implications for the fate of China’s economic reforms. China’s compliance with the agreement would be pervasive and far-reaching, leading to revolutionary changes in all of China’s financial sectors, in terms of fiscal policy, monetary policy, and foreign trade measures. Furthermore, becoming a member of the WTO would put enormous pressure on China’s domestic reform effort, which includes all of the most principal sectors, such as telecom, banking, and insurance: areas which historically have met with heav resistance to change. Dr. Bottelier believes that granting China WTO membership would provide it with a constructive framework for reform.

 Dr. Bottelier maintained that the Chinese Communist Party’s monopoly on China’s domestic political power cannot be sustained forever. Pluralism already exists in Chinese society, and WTO membership would encourage a greater emphasis on professionalism within the Party. Moreover, Bottelier noted that the notion that China remains a closed economy is utterly antiquated. In fact, China’s economy is more open than that of India, even though India is already a WTO member. He explained that Chi--na’s economy (at the current exchange rate) is larger than those of Russia, India, and Indonesia combined. Furthermore, since 1991, $300 billion dollars of private foreign direct investment (FDI) have been invested into China. While China’s economy is currently experiencing difficulties with its internal fiscal system, it is performing extraordinarily externally. Chi-n---a was the only economy that sailed through the Asian financial crisis without having to devalue its currency, and while maintaining foreign investment flow. But why, Dr. Bottelier marveled, would China be so enthusiastic about joining the WTO when it would seem that it has little to gain from membership? Dr. Bottelier put China’s relationship with the WTO into historical perspective by explaining that China was a founding member of the predecessor of WTO, the GATT (1948). China applied for WTO membership in 1986 but was denied. Now, its leaders recognize that China must be integrated into the larger world economic system if it hopes to continue to build upon its progressive economic development. Thus, the Chinese are thinking in the long term. China has attracted huge amounts of FDI, representing tens of thousands of foreign enterprises, and can no longer afford to neglect this force in its economy.

 The bilateral Most Favored Nation status treaty which has existed between the U.S. and China since July 1979 is not nearly as comprehensive as the WTO agreement would be, and is thus not nearly as beneficial to the U.S. or to China as the permanent normal trade relations (PNTR) agreement would be. Dr. Bottelier emphasized that the issues that are to be voted upon by the U.S. Congress are not the prerogative of any one government or legislative body to decide. Thus, if the U.S. Congress votes against PNTR, it would be an historic setback in U.S.-China relations because it would confirm that the U.S. is not open to China’s economic and political advancement and, rather, continues to pursue a modified policy of containment. Therefore, PNTR is not a technicality, but a major political issue.

 In light of the impending PNTR vote in Congress, Professor David Lampton illuminated the disturbing concatenation of events affecting U.S.-China relations this spring. The coincidence of the U.S. congressional voting calendar on PNTR, the resolution condemning violations of human rights by the U.N. Human Rights Commission in Ge-neva in April, the Theater Missile Defense (TMD) and National Missile Defense (NMD) system debates, and the ever-controversial Taiwan issue inevitably sends a troubling signal to China of how America is defining its national and international interests. Lampton shed light on the reciprocal misconceptions between the National People’s Congress and the U.S. Congress, which have further soured relations. The Taiwan issue is especially delicate, because of the ambiguous stance of American foreign policymakers, as the cloud surrounding the Taiwan Security Enhancement Act bears witness. Professor Lampton pointed out that the U.S. has done nothing to mobilize its allies on the issue, and that American foreign policymakers must convey to Taiwan that the U.S. will not allow Taiwan to define our national interests. Professor Lampton agreed that supporting China WTO membership would be a positive incentive for improved relations. Yet, the U.S. Congress seems to be approaching the issue with a political bazaar mentality, mindless of the potentially drastic consequences of such an approach. There is a broader historic and strategic calculus involved in whether or not China would use force to retain Taiwan, and a simplistic comparison of capabilities cannot be applied. The U.S. policymakers and American people must understand that this issue really could cause a war. It is not reassuring enough that people the world over don’t want a war because, as Lampton perceptively pointed out, people probably didn’t want a war either in 1914 or 1860 either. He maintained that the United States must at once strengthen ties with China through free trade and mobilize American allies to further pacify relations.

 Ambassador James Sasser delivered the luncheon’s keynote address, in which he elaborated upon the current concerns over cross-strait relations. He expressed his disappointment at the deterioration of human rights in China, which seemed to escalate after President Clinton’s visit. However, he did observe that the Chinese are freer now than they have ever been, and he ended on an optimistic note by exploring possible avenues for a renewed dialogue between China and America.

Spring 2000 Newsletter Index || U.S.-China Policy Review Mainpage